Outsourcing: Reforms not rhetoric
Summary
Topics
Instead of blaming black-hearted CEOs or predatory foreign countries, hecontends that the root of the issue has always remained within U.S.borders, in an institution often not mentioned in today's politicalrhetoric: the classroom.
"We spoiled an entire generation with the '90s. The expectation was: Yougo to college, find a product, get venture capital money and, boom,you're a millionaire," said Denis, the chief information officer atTrimble Navigation,a satellite software company based in Sunnyvale, Calif., that has morethan 2,000 employees. "The realism is missing: Unless they're in the top5 percent of schools, they haven't got any hope. The very jobs we'retraining students to do are the ones we're exporting."
As the the merits of "offshoring" American labor are debated thispresidential election year, the fact is that some jobs in manufacturing,customer service and other established U.S. sectors may never return.But for the high-technology industry, the more pressing concern is thelabor force of tomorrow, not current losses. Job security in the futurewill be defined largely by the future of research and development--theintellectual capital that has always kept the country at the competitiveforefront.
These issues go far beyond immediate economic concerns and challengesome fundamental principles of American culture. Many believe that U.S.society, which has always placed a premium on breakthroughs byindividual achievement, must redefine its notion of success to includeincremental advancements, often produced by committee in relativeanonymity.
"The killer app is killing us. Heroes are made only when there's a needfor one," said Sam Gill, chair of the
Companies emphasize the need to cultivate and advance new technologiesthat will expand their own businesses and, in turn, continue the cycleof U.S. innovation that began with the Industrial Revolution. Yet thisfundamental issue has been
In scores of interviews with government officials, business leaders andacademics, CNET News.com has identified three points that are crucial toany national agenda devoted to keeping advanced R&D in the UnitedStates: education reform, professional retraining and researchinvestment. If these areas are neglected, the nation could face direconsequences that transcend the outsourcing issue and threaten toundermine the country's historical status as the world leader intechnology:
• Educators and students concede that university curricula areoften hopelessly obsolete, and enrollment in computer sciences hasplummeted since the dot-com bust. In a survey of Ph.D.-granting computerscience departments in the United States, the
• Government programs to train workers have generally failed.For example, a federal program funded by fees from H-1B
• R&D in all fields grew just 1 percent last year to $284billion, according to the
A public-policy professor at the
That movement is precisely what many fear most. While manufacturing,basic programming and other types of commoditized work have already leftthe country, the U.S. technology industry has traditionally viewed itsadvanced research as the secret ingredient that keeps it at No. 1.
"R&D budgets are migrating offshore. These are red flags, becausethis is the heart of our business," said George Gilbert, the managingpartner of the Tech Strategy Partners consultancy and a former market analyst atCredit Suisse First Boston. "It's not just labor arbitrage. Now, it'sbeing called 'distributed development.'"
Just as the number of overall jobs moved offshore is impossible to pinpoint, it is unclear how many technology R&D positions have beenexported. But major U.S. companiessuch as IBM, Microsoft and Oracle are establishing overseas researchcenters with thousands of employees.
Forrester Research has projected that about 473,000 computer servicesjobs will go offshore by 2015. In addition, research firm Gartner has estimated that 1 out of 10 jobs at information technology companies willmove to emerging markets and that 1 out of 20 jobs in internalinformation systems departments will move overseas by the end of thisyear.
To counter that trend, some in government and industry say America mustget back to basics. And in this case, that means kindergarten.
"The most intelligent thing the U.S. government can do is to beef up theeducation system. The K-12 system does a good job of weeding out anystudents interested in math and science," Intel CEO
EDUCATION
Calls for improvements in the U.S. education system have kept coming fordecades, but they have taken on renewed urgency where technology isconcerned.
Although academic achievement in mathematics and science subjects hasimproved since the 1970s, the National Science Foundation reported in2002 that few students are attaining levels deemed "proficient" or"advanced." Citing an international study, the foundation said17-year-old American students tended to perform worse than theircounterparts in other countries.
"In considering the issue of expanding our skilled work force, some havea gnawing sense that our problems may be more than temporary and thatthe roots of the problem may extend back through our education system,"Federal Reserve Board Chairman Alan Greenspan said at an offshore-outsourcing conference at Boston College in March.
An estimated 1.2 million students quit high school each year, accordingto a study by the nonprofit
President Bush has touted the
Democratic challenger John Kerry has a number of
But all these ideas may be thwarted by a problem that no amount ofpolitical rhetoric can fix: a lack of teachers. An
The commission recommended that funds for teacher salaries in publicschools should be raised by $30 billion and that educators' pay be basedpartly on performance. Each teacher should get a 10 percent raise, thepanel recommended, and the top-performing half should receive a 30percent increase.
"The situation is in some ways like in 1957, when President Eisenhowermandated a national program to improve math and science education,pursuant to the launch of Sputnik," the
Hands-on education is a cornerstone of the Gary and Jerri-Ann Jacobs High Tech High Charter School, a small San Diego public school that hasrecorded some impressive results. The
The key to the school's approach is not training students in aparticular skill that could soon become obsolete, but rather helpingthem develop critical-thinking and project management abilities throughwork with local businesses and other real-world assignments. Studentshave even pitched start-up company plans to venture capitalists and, intwo cases, are getting patents for their ideas.
"What you want to do is make the school place and the workplace morepermeable," Principal Larry Rosenstock said. "You want a lot ofscientists and engineers coming into the school on a regular basis."
Educators hope that such programs will revive flagging interest intechnology at the college level as well.
The
The enrollment decline is most striking in California, home to SiliconValley. Preliminary figures from San Jose State University, whichcounted 765 students in its computer science program in spring 2002,show a drop of about 30 percent, to 535, in the same period this year.Similar decreases have been reported throughout California StateUniversity's 19-campus system, including the one in San Francisco, which had recently considered closing its School of Engineering altogether.
SFSU's Gill is taking action to reverse this trend. After cancelingthree classes this semester as a result of waning student interest, thefrustrated professor began recruiting executives such as TrimbleNavigation's Denis for a joint corporate-university program that employsstudents on actual projects for participating companies.
"It's better for us, as a university, to let the industry lead it andcommit to it, because then it will happen," Gill said, acknowledgingthat the situation needs to be tackled more quickly than academia, withits bureaucratic pace, usually does. "It will upgrade what's beingtaught in the classroom to reflect the needs of industry. We hope thatour program can serve as a model for campuses across the country."
Not surprisingly, such emphasis on practical skills is welcomed by theindustry. Gartner analyst Linda Cohen says universities must shift theiremphasis from pure computer science to management and business skills,such as how to finance technology operations, how to supervisepartnerships and how to assess the risks of adopting a cutting-edgetechnology.
Cohen argues that many IT jobs sent offshore are not worth trying topreserve in the United States, because they are increasingly donethrough automation and will dwindle over time. "It's basically theindustrialization of IT," she said. "As technology matures, jobfunctions will be replaced by automation--with or withoutoutsourcing."
Students confirm that university curricula are often based onyesterday's technology. "There is definitely a lag time," said JimSeeto, the president of a student group at SFSU that helps membersacquire technology skills beyond the classroom. "In one of our projects,we try to focus students on different operating systems. The prevalencethroughout the school is Windows as opposed to Linux, which isup-and-coming. School seems to be a couple of steps behind what's outthere."
RETRAINING
No one has proposed any magic formula to keep advanced technology workfrom flowing offshore. But misdirected efforts in government-sponsoredprograms show there is room for improvement in retraining Americanworkers who have been displaced or are at risk of losing their jobs.
"For too long, most federally funded training programs were not focusedon employer skill needs," conceded Mason Bishop, a deputy assistantsecretary for employment and training at the U.S. Department ofLabor.
Federal law now calls for billions of dollars in annual training fundsto be directed by local organizations, whose leadership boards includemany industry representatives. Yet these Workforce Investment Boardsgenerally attract smaller businesses, not those that lead industrytrends. Case in point: The 42-member Workforce Investment Board for Oakland, Calif., includes just one major technology company--SBCCommunications.
Workforce Investment Boards are "perceived by members to be a goodnetworking activity," said Mike Wilson, CEO of the Bay Area TechnologyEducation Collaborative, an Oakland-based training group also known asBayTEC. "Largeorganizations don't care about that, necessarily."
Foreign help for U.S.?
Opinions vary not only about exporting technology work abroad, but also about importing technology talent from foreign nations.
Some want the United States to make it easier to bring in skilled workers through visas and allow graduates of American advanced-degree programs to stay in the country. Others say the United States has plenty of highly educated technology professionals still looking for work, and that guest-worker visa programs like the H-1B are rife with abuse and actually fuel the shift of tech work overseas.
The H-1B program, which allows skilled workers to enter the country for up to six years, is likely to remain a flash point. In February, less than five months into its fiscal year, the federal government had already received enough applications to reach the 65,000 limit allowed for 2004.
Although Oakland's board devotes much of its energy to nontechnologyefforts, such as helping local residents get jobs at the city'sexpanding airport, it also is trying to aid displaced tech workers. Forexample, a $400,000 program dubbed "Tech to Teachers" is assisting 43laid-off technology workers become math and science teachers in urbanareas.
Much of the work force investment board money gets funneled intofederally mandated "one-stop career centers," which provide resourcesfor job searches, said Al Auletta, the Oakland board's executivedirector. "There's not a heck of a lot of funding left for training," hesaid.
Industry organizations want more funds to be specifically designated fortechnology workers. The
The Bush administration has proposed spending $14.6 billion next year ontraining programs and grants for technical and two-year postsecondaryschools--a 6.7 percent increase on this year's budget. The plan wouldearmark $250 million for a new grant program for training in communityand technical colleges.
Wilson says such federal support is critical to programs that help notonly those who have already been displaced by offshore outsourcing, butalso those who may need protection against it in the future. BayTEC isrunning a $3 million, three-year effort to train 759 workers at localcompanies, including IBM, to move up the ladder and therefore helpsafeguard them from losing their jobs to overseas labor.
For such programs to succeed, the organizations that run them need tomake an important shift from a social-services mentality to aneconomic-development mind set, Wilson believes.
"It's really like turning a tanker in the water," he said. "The ship'sfinally turning in the right direction."
Some companies aren't waiting for that ship to come in. IBM, which hasbeen criticized for moving jobs overseas, recently declared it woulddevote $25 million over two years totraining its employees and business partners. "There are lots ofgovernment programs, but they train people for jobs that don't exist--inthe past," CEO Sam Palmisano said at the time. "This is for futurejobs."
Others say entirely new government approaches are needed to retrainworkers for the next major cycle of technological innovation. HarrisMiller, president of the Information Technology Association of America trade group, has outlined a plan that would allow adisplaced worker to receive a $10,000 grant and $10,000 in a subsidizedloan to obtain a masters degree or otherwise improve skills. Theproposal would cover 20,000 workers for $200 million annually, Millerestimates--"just a slight diversion from other multibillion-dollarprograms."
Various researchers have put forward other types of governmentincentives with similar goals. Catherine Mann of the
Hira, of the Rochester Institute of Technology, has modeled a trainingsuggestion on the current federal R&D tax credit. But he and othersrecommend that any such tax breaks be linked explicitly to employees, toensure companies use the resources for programs that benefit the workforce.
"If we're going to come up with a program to help people make thetransition from jobs that are now becoming competitive elsewhere, I'drather see the benefits go directly to the people, not just thecompanies," said Rick White, a former Republican congressman and nowpresident and CEO of bipartisan industry lobbying group TechNet.
RESEARCH
Regardless of the retraining issue, research and development in generalis widely viewed as key to the future of the technology industry in theUnited States.
American R&D investments are far greater than those in any othernation in total numbers, but other countries can show a greatercommitment to research and development, when looked at as a share oftheir economy. A European Commission study last year found that R&Dinvestments amounted to 2.8 percent of gross domestic product in theUnited States in 2002, compared with 2.98 percent in Japan in 2000 and3.4 percent in Finland 2000, the last year data were available.
Duane Shelton, president of the
"By this measurement, the U.S. really wilted in the 1990s," Sheltonsaid. "The investment in physical sciences has been fairly flat over thelast 10 years or so."
Shelton and others are concerned about the direction of bothgovernment-sponsored and corporate R&D efforts. Industry accountsfor the majority of R&D spending, but its inflation-adjustedinvestment dropped in 2001, according to the National ScienceFoundation, which estimates the downward trend continued in 2002 and2003.
Bush's 2005 budget calls for raising federal R&D spending by 4.3percent to $132 billion, but the increase is focused on weaponsdevelopment and homeland security, according to the American Association for the Advancement of Science. The plan leaves "all other federal R&D programscollectively with declining funding," according to the association.
Phillip Bond, President Bush's under secretary of commerce fortechnology, said much of the work in the Defense and Homeland Securitydepartments involves physical science and engineering. He also suggestedthe federal focus on life science research will pay off in the realm ofinformation technology. "There is a kind of wet-dry, lifescience-physical science convergence that is taking place," he said.
Industry groups say the federal government can encourage companies tospend more on R&D by granting permanent status to a current federaltax credit for research and development. The credit was introduced in1981 and has been extended 10 times through tax legislation.
Without a permanent law on the books, companies can't factor in thecredit as they assess the value of their long-term research investments,TechNet contends. "Yet it is exactly this sustained, long-terminvestment in research and development that will ensure continuedinnovation and the next generation of critical technologies," the grouphas said.
President Bush and likely challenger Kerry agree that the R&D taxcredit should be made permanent. Kerry also calls for increased fundingfor "key research programs and agencies," such as the National ScienceFoundation and the National Aeronautics and Space Administration.
Others argue for a more direct form of government help, such as publicinvestment in start-ups. A leader of the Council on Competitiveness, agroup of U.S. corporate, academic and labor leaders, has argued that thegovernment can act as
Foreign countries are already doing more to attract cutting-edgeR&D, according to Curt Carlson, CEO of SRI International, a nonprofitresearch institute based in Menlo Park, Calif. Carlson said Taiwan andSingapore are offering to subsidize 30 percent to 40 percent of thecosts of new technology-focused companies for up to five years.
"We don't have anything that's nearly as aggressive as what's going onthere," Carlson said. "I don't see the urgency yet in the U.S. about howfast the world is moving and how fast the other countries are moving tocatch up to us."
Still, at least some industry veterans are banking on a secret weapon tomaintain America's leadership in technology: Yankee ingenuity. And theycaution against overreacting to outsourcing and other trends, concernedthat government regulation will backfire by stifling the creativeprocess that breeds innovation and entrepreneurialism.
"In recent decades, this country seems to possess some magic talismanthat tells us what will become important to society around the world andto provide what they want," said Andy Oram, of technology publisherO'Reilly & Associates, who is a member of activist group
Reader resources
Employee/company resource sites
U.S. industry associations
Offshoring opponents
- TechsUnite
- WashTech (Washington Alliance of Technology Workers)
- Exporting of America (CNN's Lou Dobbs)
Instead of blaming black-hearted CEOs or predatory foreign countries, hecontends that the root of the issue has always remained within U.S.borders, in an institution often not mentioned in today's politicalrhetoric: the classroom.
"We spoiled an entire generation with the '90s. The expectation was: Yougo to college, find a product, get venture capital money and, boom,you're a millionaire," said Denis, the chief information officer atTrimble Navigation,a satellite software company based in Sunnyvale, Calif., that has morethan 2,000 employees. "The realism is missing: Unless they're in the top5 percent of schools, they haven't got any hope. The very jobs we'retraining students to do are the ones we're exporting."
As the the merits of "offshoring" American labor are debated thispresidential election year, the fact is that some jobs in manufacturing,customer service and other established U.S. sectors may never return.But for the high-technology industry, the more pressing concern is thelabor force of tomorrow, not current losses. Job security in the futurewill be defined largely by the future of research and development--theintellectual capital that has always kept the country at the competitiveforefront.
These issues go far beyond immediate economic concerns and challengesome fundamental principles of American culture. Many believe that U.S.society, which has always placed a premium on breakthroughs byindividual achievement, must redefine its notion of success to includeincremental advancements, often produced by committee in relativeanonymity.
"The killer app is killing us. Heroes are made only when there's a needfor one," said Sam Gill, chair of the
Companies emphasize the need to cultivate and advance new technologiesthat will expand their own businesses and, in turn, continue the cycleof U.S. innovation that began with the Industrial Revolution. Yet thisfundamental issue has been
In scores of interviews with government officials, business leaders andacademics, CNET News.com has identified three points that are crucial toany national agenda devoted to keeping advanced R&D in the UnitedStates: education reform, professional retraining and researchinvestment. If these areas are neglected, the nation could face direconsequences that transcend the outsourcing issue and threaten toundermine the country's historical status as the world leader intechnology:
• Educators and students concede that university curricula areoften hopelessly obsolete, and enrollment in computer sciences hasplummeted since the dot-com bust. In a survey of Ph.D.-granting computerscience departments in the United States, the
• Government programs to train workers have generally failed.For example, a federal program funded by fees from H-1B
• R&D in all fields grew just 1 percent last year to $284billion, according to the
A public-policy professor at the
That movement is precisely what many fear most. While manufacturing,basic programming and other types of commoditized work have already leftthe country, the U.S. technology industry has traditionally viewed itsadvanced research as the secret ingredient that keeps it at No. 1.
"R&D budgets are migrating offshore. These are red flags, becausethis is the heart of our business," said George Gilbert, the managingpartner of the Tech Strategy Partners consultancy and a former market analyst atCredit Suisse First Boston. "It's not just labor arbitrage. Now, it'sbeing called 'distributed development.'"
Just as the number of overall jobs moved offshore is impossible to pinpoint, it is unclear how many technology R&D positions have beenexported. But major U.S. companiessuch as IBM, Microsoft and Oracle are establishing overseas researchcenters with thousands of employees.
Forrester Research has projected that about 473,000 computer servicesjobs will go offshore by 2015. In addition, research firm Gartner has estimated that 1 out of 10 jobs at information technology companies willmove to emerging markets and that 1 out of 20 jobs in internalinformation systems departments will move overseas by the end of thisyear.
To counter that trend, some in government and industry say America mustget back to basics. And in this case, that means kindergarten.
"The most intelligent thing the U.S. government can do is to beef up theeducation system. The K-12 system does a good job of weeding out anystudents interested in math and science," Intel CEO
EDUCATION
Calls for improvements in the U.S. education system have kept coming fordecades, but they have taken on renewed urgency where technology isconcerned.
Although academic achievement in mathematics and science subjects hasimproved since the 1970s, the National Science Foundation reported in2002 that few students are attaining levels deemed "proficient" or"advanced." Citing an international study, the foundation said17-year-old American students tended to perform worse than theircounterparts in other countries.
"In considering the issue of expanding our skilled work force, some havea gnawing sense that our problems may be more than temporary and thatthe roots of the problem may extend back through our education system,"Federal Reserve Board Chairman Alan Greenspan said at an offshore-outsourcing conference at Boston College in March.
An estimated 1.2 million students quit high school each year, accordingto a study by the nonprofit
President Bush has touted the
Democratic challenger John Kerry has a number of
But all these ideas may be thwarted by a problem that no amount ofpolitical rhetoric can fix: a lack of teachers. An
The commission recommended that funds for teacher salaries in publicschools should be raised by $30 billion and that educators' pay be basedpartly on performance. Each teacher should get a 10 percent raise, thepanel recommended, and the top-performing half should receive a 30percent increase.
"The situation is in some ways like in 1957, when President Eisenhowermandated a national program to improve math and science education,pursuant to the launch of Sputnik," the
Hands-on education is a cornerstone of the Gary and Jerri-Ann Jacobs High Tech High Charter School, a small San Diego public school that hasrecorded some impressive results. The
The key to the school's approach is not training students in aparticular skill that could soon become obsolete, but rather helpingthem develop critical-thinking and project management abilities throughwork with local businesses and other real-world assignments. Studentshave even pitched start-up company plans to venture capitalists and, intwo cases, are getting patents for their ideas.
"What you want to do is make the school place and the workplace morepermeable," Principal Larry Rosenstock said. "You want a lot ofscientists and engineers coming into the school on a regular basis."
Educators hope that such programs will revive flagging interest intechnology at the college level as well.
The
The enrollment decline is most striking in California, home to SiliconValley. Preliminary figures from San Jose State University, whichcounted 765 students in its computer science program in spring 2002,show a drop of about 30 percent, to 535, in the same period this year.Similar decreases have been reported throughout California StateUniversity's 19-campus system, including the one in San Francisco, which had recently considered closing its School of Engineering altogether.
SFSU's Gill is taking action to reverse this trend. After cancelingthree classes this semester as a result of waning student interest, thefrustrated professor began recruiting executives such as TrimbleNavigation's Denis for a joint corporate-university program that employsstudents on actual projects for participating companies.
"It's better for us, as a university, to let the industry lead it andcommit to it, because then it will happen," Gill said, acknowledgingthat the situation needs to be tackled more quickly than academia, withits bureaucratic pace, usually does. "It will upgrade what's beingtaught in the classroom to reflect the needs of industry. We hope thatour program can serve as a model for campuses across the country."
Not surprisingly, such emphasis on practical skills is welcomed by theindustry. Gartner analyst Linda Cohen says universities must shift theiremphasis from pure computer science to management and business skills,such as how to finance technology operations, how to supervisepartnerships and how to assess the risks of adopting a cutting-edgetechnology.
Cohen argues that many IT jobs sent offshore are not worth trying topreserve in the United States, because they are increasingly donethrough automation and will dwindle over time. "It's basically theindustrialization of IT," she said. "As technology matures, jobfunctions will be replaced by automation--with or withoutoutsourcing."
Students confirm that university curricula are often based onyesterday's technology. "There is definitely a lag time," said JimSeeto, the president of a student group at SFSU that helps membersacquire technology skills beyond the classroom. "In one of our projects,we try to focus students on different operating systems. The prevalencethroughout the school is Windows as opposed to Linux, which isup-and-coming. School seems to be a couple of steps behind what's outthere."
RETRAINING
No one has proposed any magic formula to keep advanced technology workfrom flowing offshore. But misdirected efforts in government-sponsoredprograms show there is room for improvement in retraining Americanworkers who have been displaced or are at risk of losing their jobs.
"For too long, most federally funded training programs were not focusedon employer skill needs," conceded Mason Bishop, a deputy assistantsecretary for employment and training at the U.S. Department ofLabor.
Federal law now calls for billions of dollars in annual training fundsto be directed by local organizations, whose leadership boards includemany industry representatives. Yet these Workforce Investment Boardsgenerally attract smaller businesses, not those that lead industrytrends. Case in point: The 42-member Workforce Investment Board for Oakland, Calif., includes just one major technology company--SBCCommunications.
Workforce Investment Boards are "perceived by members to be a goodnetworking activity," said Mike Wilson, CEO of the Bay Area TechnologyEducation Collaborative, an Oakland-based training group also known asBayTEC. "Largeorganizations don't care about that, necessarily."
Foreign help for U.S.?
Opinions vary not only about exporting technology work abroad, but also about importing technology talent from foreign nations.
Some want the United States to make it easier to bring in skilled workers through visas and allow graduates of American advanced-degree programs to stay in the country. Others say the United States has plenty of highly educated technology professionals still looking for work, and that guest-worker visa programs like the H-1B are rife with abuse and actually fuel the shift of tech work overseas.
The H-1B program, which allows skilled workers to enter the country for up to six years, is likely to remain a flash point. In February, less than five months into its fiscal year, the federal government had already received enough applications to reach the 65,000 limit allowed for 2004.
Although Oakland's board devotes much of its energy to nontechnologyefforts, such as helping local residents get jobs at the city'sexpanding airport, it also is trying to aid displaced tech workers. Forexample, a $400,000 program dubbed "Tech to Teachers" is assisting 43laid-off technology workers become math and science teachers in urbanareas.
Much of the work force investment board money gets funneled intofederally mandated "one-stop career centers," which provide resourcesfor job searches, said Al Auletta, the Oakland board's executivedirector. "There's not a heck of a lot of funding left for training," hesaid.
Industry organizations want more funds to be specifically designated fortechnology workers. The
The Bush administration has proposed spending $14.6 billion next year ontraining programs and grants for technical and two-year postsecondaryschools--a 6.7 percent increase on this year's budget. The plan wouldearmark $250 million for a new grant program for training in communityand technical colleges.
Wilson says such federal support is critical to programs that help notonly those who have already been displaced by offshore outsourcing, butalso those who may need protection against it in the future. BayTEC isrunning a $3 million, three-year effort to train 759 workers at localcompanies, including IBM, to move up the ladder and therefore helpsafeguard them from losing their jobs to overseas labor.
For such programs to succeed, the organizations that run them need tomake an important shift from a social-services mentality to aneconomic-development mind set, Wilson believes.
"It's really like turning a tanker in the water," he said. "The ship'sfinally turning in the right direction."
Some companies aren't waiting for that ship to come in. IBM, which hasbeen criticized for moving jobs overseas, recently declared it woulddevote $25 million over two years totraining its employees and business partners. "There are lots ofgovernment programs, but they train people for jobs that don't exist--inthe past," CEO Sam Palmisano said at the time. "This is for futurejobs."
Others say entirely new government approaches are needed to retrainworkers for the next major cycle of technological innovation. HarrisMiller, president of the Information Technology Association of America trade group, has outlined a plan that would allow adisplaced worker to receive a $10,000 grant and $10,000 in a subsidizedloan to obtain a masters degree or otherwise improve skills. Theproposal would cover 20,000 workers for $200 million annually, Millerestimates--"just a slight diversion from other multibillion-dollarprograms."
Various researchers have put forward other types of governmentincentives with similar goals. Catherine Mann of the
Hira, of the Rochester Institute of Technology, has modeled a trainingsuggestion on the current federal R&D tax credit. But he and othersrecommend that any such tax breaks be linked explicitly to employees, toensure companies use the resources for programs that benefit the workforce.
"If we're going to come up with a program to help people make thetransition from jobs that are now becoming competitive elsewhere, I'drather see the benefits go directly to the people, not just thecompanies," said Rick White, a former Republican congressman and nowpresident and CEO of bipartisan industry lobbying group TechNet.
RESEARCH
Regardless of the retraining issue, research and development in generalis widely viewed as key to the future of the technology industry in theUnited States.
American R&D investments are far greater than those in any othernation in total numbers, but other countries can show a greatercommitment to research and development, when looked at as a share oftheir economy. A European Commission study last year found that R&Dinvestments amounted to 2.8 percent of gross domestic product in theUnited States in 2002, compared with 2.98 percent in Japan in 2000 and3.4 percent in Finland 2000, the last year data were available.
Duane Shelton, president of the
"By this measurement, the U.S. really wilted in the 1990s," Sheltonsaid. "The investment in physical sciences has been fairly flat over thelast 10 years or so."
Shelton and others are concerned about the direction of bothgovernment-sponsored and corporate R&D efforts. Industry accountsfor the majority of R&D spending, but its inflation-adjustedinvestment dropped in 2001, according to the National ScienceFoundation, which estimates the downward trend continued in 2002 and2003.
Bush's 2005 budget calls for raising federal R&D spending by 4.3percent to $132 billion, but the increase is focused on weaponsdevelopment and homeland security, according to the American Association for the Advancement of Science. The plan leaves "all other federal R&D programscollectively with declining funding," according to the association.
Phillip Bond, President Bush's under secretary of commerce fortechnology, said much of the work in the Defense and Homeland Securitydepartments involves physical science and engineering. He also suggestedthe federal focus on life science research will pay off in the realm ofinformation technology. "There is a kind of wet-dry, lifescience-physical science convergence that is taking place," he said.
Industry groups say the federal government can encourage companies tospend more on R&D by granting permanent status to a current federaltax credit for research and development. The credit was introduced in1981 and has been extended 10 times through tax legislation.
Without a permanent law on the books, companies can't factor in thecredit as they assess the value of their long-term research investments,TechNet contends. "Yet it is exactly this sustained, long-terminvestment in research and development that will ensure continuedinnovation and the next generation of critical technologies," the grouphas said.
President Bush and likely challenger Kerry agree that the R&D taxcredit should be made permanent. Kerry also calls for increased fundingfor "key research programs and agencies," such as the National ScienceFoundation and the National Aeronautics and Space Administration.
Others argue for a more direct form of government help, such as publicinvestment in start-ups. A leader of the Council on Competitiveness, agroup of U.S. corporate, academic and labor leaders, has argued that thegovernment can act as
Foreign countries are already doing more to attract cutting-edgeR&D, according to Curt Carlson, CEO of SRI International, a nonprofitresearch institute based in Menlo Park, Calif. Carlson said Taiwan andSingapore are offering to subsidize 30 percent to 40 percent of thecosts of new technology-focused companies for up to five years.
"We don't have anything that's nearly as aggressive as what's going onthere," Carlson said. "I don't see the urgency yet in the U.S. about howfast the world is moving and how fast the other countries are moving tocatch up to us."
Still, at least some industry veterans are banking on a secret weapon tomaintain America's leadership in technology: Yankee ingenuity. And theycaution against overreacting to outsourcing and other trends, concernedthat government regulation will backfire by stifling the creativeprocess that breeds innovation and entrepreneurialism.
"In recent decades, this country seems to possess some magic talismanthat tells us what will become important to society around the world andto provide what they want," said Andy Oram, of technology publisherO'Reilly & Associates, who is a member of activist group
Reader resources
Employee/company resource sites
U.S. industry associations
Offshoring opponents
- TechsUnite
- WashTech (Washington Alliance of Technology Workers)
- Exporting of America (CNN's Lou Dobbs)
